Southern California Home Sales At Nine Year Low
Dataquick has the Southland numbers out from California. “Southland home sales downshifted last month to the slowest pace in nine years as the rate of appreciation fell to the lowest level since fall 1999. A total of 22,712 new and resale homes sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month, DataQuick reported. That was down 22.3 percent from June and down 26.9 percent from July last year.”
“Last month’s sales total marked the lowest for a July since 1997. Southland sales have declined for eight consecutive months on a year-over-year basis.”
“‘Our sense has been that many who bought homes in recent years purchased them sooner than they otherwise would have because of very low interest rates and a great sense of urgency, given the fear of being priced out forever or missing out on a great investment. That phenomenon helps explain why there’s not more demand today. Whether July’s data also signal something more ominous at work in the market’ something that would cause a severe correction in home values, is unclear to us,’ said Marshall Prentice, DataQuick president.”
“The typical monthly mortgage payment that Southland buyers committed themselves to paying was $2,437 last month, up from $2,052 a year ago. Adjusted for inflation, current payments are about 6.2 percent above typical payments in the spring of 1989, the peak of the prior real estate cycle.”
“Waning sales coupled with a rising supply of unsold homes is weighing on price appreciation. The latest figures will undoubtedly rev up the debate over whether the Southland’s housing sector will be able to navigate a ’soft landing.’”
“‘Current trends suggest that the market is heading into a lull,’ said DataQuick analyst Andrew LePage. The one-month drop between June and July, a hefty 22%, was the most for that period since DataQuick started keeping records in 1988, the company said.”
The Desert Sun. “Coachella Valley’s once hot luxury-home market appears to be losing steam in line with the rest of the cooling local and national housing market, and some big-name companies have taken notice. After less than two years in the valley, Sotheby’s International Realty plans to pull up stakes by the end of August and shut down its only two Coachella Valley offices.”
“National luxury-home builder Toll Brothers is reporting a surge in local buyers having to cancel new-home orders.”
“The downturn in what is typically seen as an almost bullet-proof segment of the real estate market is due to waning home-buyer confidence, an inventory glut of more than 7,000 resale homes in the valley, a normal winding down of the real estate cycle and other factors, area real estate agents and industry officials said.”
“‘The conventional wisdom is that in the high-end market, these folks were wealthy before the interest rates went up and they tend to be less affected, in general, at the beginning of a market shift,’ said Greg Berkemer, of the California Desert Association of Realtors. ‘But as this continues to go on, they, like everyone else, have concerns.’”
“Toll Brothers would only say that cancellation rates were ’significantly higher than our historic levels’ in the Coachella Valley and northern California during the quarter ended July 31. The home builder said it experienced similar increases in new-home order cancellations in Las Vegas, Orlando and Phoenix.”
“For prospective buyers in the valley who plopped down hefty, non-refundable payments depending on the home’s price, having to cancel an order because their other home wouldn’t sell in time could be a painful financial lesson. Its homes generally sell for more than $600,000, and many are listed above $1 million.”
The Sacramento Bee. “Homebuyers may be turning sour on condominium conversions in a cooling real estate market, but five Sacramento County apartment owners are pressing for still more. They’re seeking approval for 700 new conversions.”
“The moves seem to fly in the face of lagging buyer enthusiasm nationally for apartments converted to for-sale condo units. Locally, some apartment owners who won conversion rights have held back on sales plans, while others who went forward have seen slow sales. From Florida to Folsom, some owners of conversion projects have begun a reverse trend of converting condos back to rentals.”
“But investors from Los Angeles and the Bay Area say they’re pressing ahead in Sacramento County, even though buyers already can pick from an abundant supply of new condos and sales incentives. These apartment owners hope to compete on price in an expensive market, and say if they falter now they’ll be poised for the region’s inevitable housing rebound later.”
“Experts call condo conversions a sign that real estate markets are peaking. ‘They only come around when the market is just red-hot,’ said Kathryn Boyce, a Sacramento-based analyst for a Costa Mesa firm that tracks the housing industry.”
‘The conventional wisdom is that in the high-end market, these folks were wealthy before the interest rates went up and they tend to be less affected, in general, at the beginning of a market shift,’ said Greg Berkemer, of the California Desert Association of Realtors. ‘But as this continues to go on, they, like everyone else, have concerns.’
I hear a lot of this ‘rich people don’t mind losing money’ stuff here in Arizona. It’s the opposite of my observations. Looks like Sothebys and Toll were wrong!
Ben,
great job on this blog, it rocks!!
I think rich people are the most concerned about losing money. They usually are more financially astute and really dislike losing money. Like the old story of someone asking the local multi-millionaire why are you shopping at the clearance section of the store. He replied, that is how a man like me became a man like me. That is I got here by being cheap not by spending big.
Exactly. This is why I do not think the upper end of the Central Coast market is not immune.
As a personal aside: saw a nice house for sale in the new neighborhood where we are renting. Purchased in 2000 for 326k. Asking price 669k. If I squint my eyes and think back, I can remember when 326k seemed like a lot of money. It still is, of course, but wow! There are no condos listed in San Luis right now for under 370k, far less SFHs, and 326k sounds SOOOOO cheap. And it is within what we could actually afford. Sigh. Asset bubbles are darn depressing from the unlanded perspective. . . .
Be patient and have plenty of cash in 2008. People with 700+ FICO’s and 20% down may be the only ones qualifying for mortgages in a couple of years.
As a side note, I had a conversation with my neighbor (who is educated) who states that the reason there is no bubble is because the US population will reach 300 million in the near future. THAT is the kind of due diligence that people are doing - un-freakin’-believable.
Ask yourself, how many high-paying jobs are there on the Central Coast? Not very many.
“Be patient and have plenty of cash in 2008. People with 700+ FICO’s and 20% down may be the only ones qualifying for mortgages in a couple of years.”
Are you predicting a 50% off sale? And do I need to keep what little cash I have insured against inflation in the meanwhile?
i agree 100%! Most of the people that I know that have money are very tight with the dollar. They are the ones that can see the trends and buy low and sell high.
Even soc-called rich people are heavily in debt. I know of one couple who bought a $3.3 million house by financing more than $2 million of it. What’s the interest on a loan like that?
My friend made a comment to me yesterday about how West Los Angeles prices will not come down that much because “everyone wants to live here”. I know more people living here than moving here…
Oops, I meant leaving here.
they probably didn’t go up that much, either - if by west side you mean the really, really nice parts like Pacific Palisades, North of Montana, etc
if they did go up by the same amount, they’ll be subject to the same reversals - only, it will probably take longer
I do know a few youngish (30s) commercial real estate agents that bought mega pads in venice - these are your prototypical U of A or USC morons who think they are so very bright but blow tons of money on cars and coke. I am certain they have assumed the same high rate of pay for their “I have a pulse” service and bid up home prices based on that.
So, when chumps like that see their rates double on their 2.5 million dollar loan, the bank will likely end up taking over. Unless they refi and then they face a deficiency judgment.
But the volume is not going to be the same. The middle class places like true west LA, Westchester, Venice, etc, that is only a slight step up from Encino, etc, in terms of quality of owners.
True, there are a lot of long time homeowners who have 2.5 million dollar equity cushions. Maybe they will retire and sell. Maybe they reverse mortgage and live off of it. Who knows.
What I do think will happen to west LA is that the very, very rich, like the Eli Broads or Richard Riodans, the only people with a lot of cash, will end up owning half of it at the bargain basement prices and their nieces and nephews will be living for free for the next 100 years here. Either that, or the Chinese and Japanese, sick of owning the securitized notes, will just buy the underlying assets at a severly cheapened dollar.
“they probably didn’t go up that much, either - if by west side you mean the really, really nice parts like Pacific Palisades, North of Montana, etc”
Oh, yes they did. Two bedroom apartment up the street is *still* on the market for $1.3 million, while a condo the other way a block went for $350K in 1995, and I thought that was high. A duplex next to one of my buildings went for $1.2 million last year, could have been had for $350K ten years ago. Houses that Zillow prices at $1.2 million in Pacific Palisades are carrying assessed valuations of $125K.
The recent graduates from the University of Spoiled Children will have to fend for themselves, unless they have trust funds.
“Either that, or the Chinese and Japanese, sick of owning the securitized notes, will just buy the underlying assets at a severly cheapened dollar.”
You can bet that all of us bubble sitters will be competing for dimes on the dollar houses with the Chindians at the bottom of the trough.
However, the Japanese may be a little gun-shy from their world wide failed RE adventures in the late 1980’s as well as their own RE meltdown. Things like that have a way of sticking in the public psyche.
Some of the very richest who’s who of LA live in the Brentwood area north of UCLA/sunset blvd. I have Been to the Broad Estate in brentwood: it may be just one of his places, but it was impressive(think about the Movie”Godfather 1 ” and the Home featured in it).
There is also the estate, Amber Hills, owned by The Kaufman’s, which covers an entire hillside in Mandeville Cyn.
These Folks do not need to worry about Bubble collapses.
Hey not everybody from ‘SC is a moron. Dont paint everybody with a wide brush. There are a-holes everywhere, rich and poor. I went to ‘SC, I’m polite to strangers, hold doors for people, drive correctly and have probably forgotten more about R.E. than most people know. Just some ah-ole was rude to you, doesn’t mean everybody is rude.
thou protests too much.
and the expression is “paint with a BROAD brush,” as in, “Traveler’s tail will make a very broad brush, and the rest of him will make very good glue and Alpo after Notre Dame humiliates ‘SC in the Colisseum this year.”
“You can bet that all of us bubble sitters will be competing for dimes on the dollar houses with the Chindians at the bottom of the trough.”
That sounds questionable to me. “The Chindians” comprise north of 1/3 of the world’s population (2b+), but a much smaller share of the world’s wealth. And their economies have recently done great as the primary suppliers for the US consumption drunkfest, but if the US consumer discovers the housing ATM has run bone dry, then the Chinese and Indian economies are toast in the near term. The global investing community has already caught a whiff of the scenario I have described — check out what happened to the Indian stock market this past May for evidence.
Only those who have ample wealth in a truly diversified form (e.g., against abnormally large currency movements and other nasty side effects of imploding credit bubbles) can be certain for the opportunity to buy a house in the US after credit underwriting standards return from the dead.
“after credit underwriting standards return from the dead”
What makes you think that will *ever* happen?
Sorry but Pac Pal skyrocketed during this period. While the 10 month rolling average price per square foot has dropped significantly from what I would term the peak in August ‘05 (-10.6%) for SFRs, home prices are still incredibly insane. Hard to imagine that this area will fall like the other parts of town.
“Even soc-called rich people are heavily in debt. I know of one couple who bought a $3.3 million house by financing more than $2 million of it. What’s the interest on a loan like that?”
You don’t know any rich people.
I am an appraiser in Florida and I can tell you that the so called rich have leveraged their multimillion dollar houses to the hilt.
In many cases the 4 million dollar house has a 2.5 million first and a 1.6 million piggyback second along with credit card debt of $100,000 plus.
Rich appearances don’t always translate to wealth.
Well, at least Toll and the other major builders saw powerful rallies in their share prices today. Never mind that home prices are falling, homebuilder stock prices always go up…
Pump and dump in full effect baby!! Short on the pops, consider it a gift from God!! HB’s are going to tank big time.
Bought more housing puts today and sold some of my longs! I love this wall street weather we’re having. In a few months, we’ll look back upon it as a fine fresh beginning.
Investing mantra for the late 1990s: “Buy the dips”
Revised mantra for the late 2000s: “Short the pops”
Well here in Orange County, Gary Watts has just released an “updated” forcast for the year where he is still promising that prices will be up by 10-12% YOY. So far, there is not a major decline in the price in the OC, actually, not one at all. However, the quality of home has improved that you can buy for the same price. 600K buys much more this year than last.
I browsed the RE ads this weekend and saw one ad for new homes offering a “$75K in landscaping allowances”. So people think they are getting 75K worth of freebies, which mask a 75K decline. Although one wonders how much that 75K allowance is really worth, my guess is less than 15K.
Its too late for him to revise his forecast! He already said “15% was in the BAG”!!
17% was/is in the bag for Ventura County in his speech here last Feb. Sad part is, he’s still technically right. 9.5% YoY according to DQnews today.
It just doesn’t matter what wild eyed forecast was!
Fact #1 ) CALI Home sales “At 9 Year Low!{see headline above}
#2) Homebuilder index today @ 32 since its inceptiopn pf August 1985 (21 yrs), there are ONLY 5 MONTHLY points lower back in 1991.
#3) Pulte and Toll and several others this week revised DOWN their sales forecasts and increased their CANCELLATION rates, while blowing off multi- millions in book values to EXIT land option contracts they don;t see neeind for the next “4-5 years”
People who can still discount this growing Train wreck of a DISASTER as a “normal winding down of the real estate cycle” or just a period of adjustment are in need of serious mental help!
oh one more thing!
If you own raw land and are financing it with “HARD MONEY”
“The first loss is the least loss!”
(voice from loudspeaker)
“Ladies and gentlemen, welcome aboard Equity Airlines. I’m Captain Lereah, and I’m assisted today by First Officer Watts. After takeoff, we’ll be climbing at a 15% climb ratio, which many people consider impossible, but this airplane is operating on a whole new aerodynamic model. Just sit back and rest assured, it’s in the bag.”
(later)
“This is Captain Lereah speaking. We’ve encountered some unexpected turbulence, caused by all the hot air from various ground-based blog sites. There is no truth that the rough ride is created by bursting bubbles. Please just sit back and enjoy the view. If it makes you feel better, take a tight grip on your ARM-rest.”
(much later)
“Ladies and gentlemen, Captain Lereah again. It seems inconceivable, but we have run out of fuel for our engines, and we are descending temporarily while we plan for a soft landing. There is no problem here, please do not be concerned. This plane is different!”
(much later still)
“Ah…this is the captain. You may have noticed that we are in a steeper decent than earlier. I can assure you that there is no reason for concern, and that we will shortly resume our normal ascent. After all, airplanes always go up, right? Now, some of your fellow passengers are upset about the smoke pouring from the engines and the pieces ripping off the wings. Please just ignore them; after all, who’s the expert here?”
(much, much later…)
“DOES ANYBODY KNOW HOW TO FLY THIS THING???????”
Too Mr. Watts doesn’t operate like a casino and takes bets on his price prediction. Most on this blog will place a wager and break his bank by the end of the year. Come on Mr. Watts, when can we place our bets. Maybe call 1-800-dim-watt.
Yeah, the median sales price has gone up here (San Luis Obispo), but I see a significant difference in asking prices. A year ago, any decent middle-class ranch house was priced in the 700s, and now they are priced in the 600s. Not a meaningful difference in price for a middle class purchaser, but at least it is a trend in the right direction.
Father in law purchased a home on the little par 3 course in Atascadero for $515k, (Santa Barbara St exit). This home was on the market for 9 months. The starting price was $675k. Its on 1.25 acres. Sounds like its soft in the areas outside of SLO city.
Yeah, prices in the city of San Luis are historically higher than other areas of the county. CalPoly is in town, which provides both a solid employment base and ongoing demand for housing; there have also been more restrictions on building here than in other areas of the county.
During the past few years, people starting buying in north and south county as San Luis itself became too expensive, and prices went up there. Now, the process seems to be happening in reverse, with the market softening first in north and south county.
14% in one year - this is only the beginning. Be patient.
I moved from the Midwest to the Central Coast ~ 10 mos ago. Still renting and would continue to do so for the a while until the prices gets more realistic. I’m an MD and thinks prices just does not make any sense. I have a colleague who bought a house in 1999 (Rancho Gardens, AG) at ~ 400K and now same houses in the neighborhod were on the market for 1.2 M. I won’t be buying a house until the prices returs to the late 1990’s level. Hopefully it will.
tell that dipstick to check dataquik oc shows 6% and the fall is just beginning.negative by sept i would say.
Orange County - where else but Disneyland.
As for Watt’s 10-12% YOY - he has NO chance!
Oh Gary outside Disneyland the “quality adjustment is HEDONICS…and that quality is “known to our FED as lower inflation”.
In elementary English Gary that is lower costs & prices.
OC you’re right on. The builders make most of their money on the upgrades, that’s why they have these fancy showrooms/design centers to get the buyers emotionally involved, so they overpay. An example is the typical bait and switch seen in a model home: there is crown molding, chair molding / base molding, which all costs $10K extra, but you could do yourself by renting a nail gun from Home Depot for $25 a day (maybe three days for a beginner) and purchasing $500 of molding.
So when the builders “give away” upgrades, they have already probably made so much moiney from the ones the buyers paid for, that they are still making loads of money, and if you use in-house mortgage co, then they really made out.
Sorry, I left off the bait and switch part: they get you to want the upgrades, then tell you they are extra…it’s amazing how differen the house looks without the molding, pantry, kitchen center isle, upgraded cabinets, etc. If you buy the base home, its really a different home altogether.
Yesterday, I spoke with a friend who became a realtor last summer (’05) and has yet to make a dime. He’s optimistic but the (non-)numbers speak volumes, if you ask me….
Riverside County, California
It’s somewhat off-topic, but I wanted to comment on the recent complaints we are hearing about mortgage brokers and appraisers “taking advantage” of sub-prime borrowers. This may sound heartless, but I don’t have ANY sympathy for people who wind up in trouble with upside-down mortgages, and difficult payments.
These same people who turn around and blame the real-estate industry for their problems when they lose their homes, were gleefully licking their chops when the appraisal came in for a ridiculous price, allowing them to borrow a tonne of cash.
It’s not as if people need to get mortgages for the full value of an appraisal! That’s their decision.
Don’t get me wrong, I hold real-estate professionals who collude in this modern ponzi scheme in the greatest contempt. But I hold the actual purchasers with a much larger amount of opprobrium.
you sound like a re lender broker aka loan shark.little late for cya ass now.
Nope. I am just a lowly renter, standing on the side-lines of the bubble. I sold my house in 2003 when things started looking REALLY crazy. I have just been constantly amazed at how more insane things continued to get.
“It’s not as if people need to get mortgages for the full value of an appraisal! That’s their decision.”
More to the point, it’s not as if people need to buy such a luxurious home that they can only afford to purchase it by stretching themselves just to make the minimum initial payment on a 100%-financed option ARM. The reason I rent is because too many people who are either speculating or cannot afford to buy have jacked purchase prices out of reach in the quality tranche which my household’s income can normally afford. Of course the situation would not be possible without due negligence on behalf of lenders, who rely heavily on a bottomless supply of greater fools to loan money which will not likely be repaid.
So far, there is not a major decline in the price in the OC, actually, not one at all. However, the quality of home has improved that you can buy for the same price. 600K buys much more this year than last.
That makes no sense. If you pay $600K for a house that would’ve cost $700K last year, then it seems to me a drop in price/value has occurred.
Actually, this does make a wee bit of sense. Many home owners/builders are throwing in all sorts of upgrades and incentives to keep the price high. Thus, you can buy a home in a new sub-division for the same price as last year, but now it comes decked out with all sorts of expensive extras.
Yes, this indicates that the same house last year (with last year’s accoutrements) wouldn’t get as much money now. However, the price of homes still stays relatively high. It’s almost like auto manufacturers starting to throw Air Conditioning and ABS breaks in to a new model for the same standard price of last year. You can’t really say the car is “cheaper” (i.e. it’s not as if you can buy the new model without the standard features, so you don’t have a choice), but you are getting more for the money.
It’s another way of keeping the “median” number high, while actual value drops. So, the guy who paid 600k last year and hasn’t upgraded would not get 600k today. Sounds like a price decline.
I makes sense as long as you understand last year’s $600k property isn’t selling. Although, I’m having trouble coming up with what was selling for $600k in OC last year…
Neil
So what? Somebody offers to cut their 700K price to 600K - on a rancher they bought for 300K 3 years ago - and I’m to feel like that’s a break? Personally, I’m of the mind that the 300K was high. Average salary X 3.5. For each region, now that’s a price to buy at.
That will never happen in LA or Orange counties. Ever.
Never? Ah but it has multiple times… last one in 89-92 we saw prices drop 35%…
In 1958, houses in Malibu were selling for about 2X median income.
In 1968, an insurance salesman, an engineer, or any professional could afford a condo in Malibu AND a 3/2 SFH across the street from the beach for his ex-wife and kids. And a Porsche and a Mercedes.
Never say never. Things have not always been like they are today, and there is no guarantee that they always will be.
i am called moon dawgy in malibu
“i am called moon dawgy in malibu”
I am called “Who da f*** is that wrinkly old fart?” there. Good thing I’m not interested in their overpriced property.
> In 1968, an insurance salesman, an engineer, or any professional could afford (long list)
Those times are gone. Americans are getting poorer again. Maybe 1945-1975 was an aberration.
that was the time when most of the wealth of this nation is held by the middle class like us. now, it is being held by the few, rich and powerful.
Josemanolo7,
It’s not rich people causing the lowered standard of living, it taxes, taxes, taxes. When social security started it was I think 1/2 percent, it is now almost 15%. That just one tax. That’s why you need two wage earners just to get by.
Anon,
IMO, the disparity between the “rich” and middle-class has been growing; indicating the movement of money from the middle class to the wealthy. Progressive income taxes actually attempt to slow this process.
Also, if fewer females entered the workforce, wages would likely be higher (notice how wages drop rather significantly once women enter formerly male-dominated professions?). More workers willing to work for lower wages (women, children and poor immigrants) cause wages to decline. Women were traditionally willing to work for less because their income used to be considered discretionary (to buy the new tablecloth or pay for vacations).
We’ve gotten ourselves into an ugly mess on this one, IMHO. The natural trend in a purely capitalistic society (w/o govt intervention) is deflationary, with money flowing from the “workers” to the wealthy.
Just MHO.
Things are different this time. CA is gonna get hit hard. Real hard. Worse than early 1990’s.
I live in OC. The prices have dropped around 100k sense the beginning of the year ( Irvine)
http://www.orange-county-real-estate-coach.com/weblogirv.html - a listing of Irvine sales each week. The average units sold per week is usually 50, this week it was 27.
Guys, this is just more white noise with the terribly innacurate median y-o-y metrics, as discussed several times. It is VERY possible for someone to be able to buy more house this year for the buck, AND have the median price still be higher y-o-y.
Once again, by the numbers: Very high-end real estate will move at a fairly static rate over the years, regardless of market conditions as the truly wealthy couldn’t care less about a housing bubble. Various comments about wealthy frugalness notwithstanding, if a wealthy person wants to buy a house to live in they simply do it. Most wealthy realize that residential RE is not a great investment and is a liability anyway. Therefore, high-end moves, and other segments stagnate. The net effect is a higher percentage of transactions are ultra high-end, thus skewing the true picture. If anyone bothers to break down transactions for the OC by price-point, I’m sure they’ll find this is exactly what is happening.
Meanwhile, those looking at middle-tier RE find a very soft market that is basically in free-fall and is crashing, thus allowing 600K to buy what 700K bought last year. Make sense? On a side note, others have opined that median really crumbles when low-end volume takes off again, but I’m not 100% sure about that.
“Whether July’s data also signal something more ominous at work in the market – something that would cause a severe correction in home values – is unclear to us. We’ll know a lot more in a few months.”
What a genius. Who ever pays this company for whatever it is they do is being robbed.
Love the Cochealla article - Things are looking up. BAHHAHHA!
Love the optomism of a salesperson. To bad your paycheck is looking DOWN! Keep spending money on that Lexus and those Bruno Malli Suits. Things will turn around anyday now!??!?!
Sorry - meant to say Brioni suits!
I’m so glad I don’t know what a Brioni suit is.
Call Nina for help in selling that pos in Coachella Valley. If she can’t help, I guess you’ll have to go back picking out cans from the dumpsters.
Sorry - Brioni suits!
Hard to figure out the comparables.. It artificially keeps the appraisals high. If you could extract it from the appraisal then you can make the adjustment, but the builders give appraisers false information if they talk to them at all. The borrower will say to me when doing a refi, the house next door sold for $650,000 but they forget to say it included the works + TV’s vacations, automobiles every upgrade you can thinks of.
Asking prices may not have changed, but selling prices certainly have in Irvine. Single family homes around 1500-2000 sq. ft. were selling for about $420 in summer ‘05. Selling price for homes is now about $370 per sq. ft.
Of course, some sellers are still asking $500 per square foot, but realtors seem to be using open houses for those homes to find buyers for themselves. The only selling that’s going on at those homes is for the realtor, not for the house. In fact, at one property down the street from us, there was a different realtor each weekend for each weekend in July. None of them seemed to have much interest in showing the property
I agree, every house we visited the realtor not only showed us that house, but also broke out a bunch of other listings that we might like. One broker even told us the one we were looking at was overpriced and that we should look at another house she was listing.
especially bad w/o the pop growth adjustment of the last 10 years
like nominal vs real
figure at least 10% pop growth
“Last month’s sales total marked the lowest for a July since 1997. Southland sales have declined for eight consecutive months on a year-over-year basis.”
This is an out and out lie! We have over 1000 illegal aliens coming across the border every hour.
- Florida will soon have 1000 more Cubans sailing in daily.
Amen & glory hallelujah to that
wow! sorry..this was in response to Mikhail’s post above
Had lunch w/ my broker today over by Chapman University. (OC/ CA)He’s young, likable guy, probably 5 or 6 years out of Chapman U so he knew of a place we could go. Anyways, I go into my speal about impending consumer contraction and the reasons we’ve all beat to death on this blog. He starts telling me how retailers are poised for a rally, high end consumer consumption is strong, yada yada.. So the waitress comes around and I interrupt her. I ask her if she has noticed a decline in patrons at the restaurant. She unloaded on us as if it has been bottled up for months on how the lunch crowd is half of what it used to be. Her friends who work at other restaurants have noticed the same thing. She mentioned that she felt that fuel prices have a lot to do with the decline, and that every one had too much debt. She also said that she has noticed CC rejections have increased at the restaurant. I finally had to thank her for her input so we could eat our lunch. My broker just looked at me and said “Point taken”
Its was priceless, one of those “found religion” type moments, you would have had to been there to really appreciate it!
I didn’t ask, but by the way this waitress spoke, I’d bet money she was a student at Chapman.
My point. The tide is a changing!
I was up in the Bay Area with friends recently, and went to a popular restaurant that generally requires reservations. We got in with no trouble on a Friday night sans the reservation. Don’t know if it means anything, but I did wonder whether the housing slowdown was at least partly responsible.
No surprise here… Even San Fran is getting dead on weekends.
more of their clients are probably on vacation.
Hope you left her a nice tip!
Wow.
Now there’s a gamble that really paid off.
It seems as if demand is silently crumbling under our very noses.
I love those stories…speaks volumes, so much more than the economist numbers and NAR realtor schtick. Medium price, schmedium price…just ask the retailers, the waitresses, the car salesmen, the jewelry stores, etc….which way the wind blows.
Along the same lines - one of my bankers commented that he found a similar test for the health of the economy - the Napkin test. He asked a customer who provided linen for local restaurants how business was doing, particularily the lunch crowd. The less napkins cleaned, the worse the economy was.
I am experiencing the same in my neighborhood in SF.
Just until a few months ago you could’nt find a parking
spot on Fri-Sat evenings, for all the restaurants and bars here.
But for the last month or two, there has been ample parking
on all the nearby blocks.
Definitely looks like discretionary/recreation spending has gone
down significantly.
Vacations in July/August? See if the crowds are still down after school is back in session in the next month or so. Just a bit of devil’s advocate. Things typically slow down in July/August around me. Not saying discretionary spending isn’t under pressure, but that there are seasonal considerations.
Maybe this explains why Buffett sold his Outback Steakhouse shares. I agree that this type of info is much better than most economists numbers and predictions.
Can’t help but add that last Saturday at noon, no less, I went into my local Tarjjay and no one, I mean no one was there. I was stunned at the lack of customers waiting for checkout. Zip, nada, nil! Okay, maybe everyone is in the store shopping and it is a slow moment at the checkout. Nope! I thought someone had yelled fire or Elvis was spotted outside. The store literally had more employees than customers and this was at noon. I can’t believe everyone took a lunch break!
These anecdotal examples tell the tale far better than any twisted, spin statistics and PR. Anyone in the Bay area hearing any layoff rumblings from Ebay? As a part time seller, I can tell you that all the buyers who are considered “casual accumulators” (not serious collectors) dried up very suddenly almost in unison with the word getting out about the housing bubble. It’s like someone turned a faucet off. Around the same time, the Ebay executives started in with this bs PR campaign “to get back to their core market”, the auctions. I actually did not correlate the success of ebay with this series of bubbles, but now I’m convinced that a lot of loose equity money drove their business. If that’s the case, ebay has really shot themselves in the foot with their fixed price business and their positioning of themselves as a lowball marketplace, in effect screwing their customers (the sellers) by pandering to the buyers and I think the whole “wealth effect” phemonenon is just starting to dawn on them. I was wondering why I’m hearing all this frantic “core market” PR and why they are desperately offering “free consultations” to ebay sellers. Now it is making sense.
Interesting. I searched for ebay news, but this effect must be leading the market.
Also, because of their fading celebrity status, I’m not sure anything can be made of the almost 50% drop in ebay shares since their peak.
But we have almost every business that serves the lower middle class or middle class seing same store sales slowing below inflation (real sales are dropping even if nominal sales are growing): Walmart, Outback, Ruby Tuesdays, cheesecake factory (middle class “splurge”), McDonalds, Redlobster (down 2%), Olive Garden (below inflation), most coffee shops (ohhh… Starbucks grew at 2%… wait, that’s below inflation!).
We’re in a slowdown and its accelerating. As people spend less… those who have an income “pinched” by them spending less are feeling it too. Normally this is a slow process.
I think this is going to be the fastest downturn since WWII.
Partially due to the internet speeding information transfer. This has increased the frequency of economic cycles. Maybe a good thing, maybe bad…
I think e-bay will hurt with collectibles. But pretty soon every mom and pop will be bargan hunting. Hey, I bet there are a lot of cool boats about to be sold!
Neil
Interesting analysis, Neil. Ebay became the “poor man’s auction” after an initial peak where people bid like crazy on all sorts of items and drove the prices up. Then it drove the prices down and became the great leveler of prices in the collectibles market. It then became a sort of lowball marketplace, although if you know what you are doing it is still possible to make money there. I think you’ll see lots of people trying to unload stuff cheap, but who will buy when all that loose equity money has dried up and no one has money to buy even bargains? I’m thinking that when it becomes a choice between filling the tank or bidding on trinket, the gas tank will win out. Ebay needs buyers, because without them, the sellers stop listing because the business is not there. When sellers cut back or stop listing altogether, ebay’s revenue plummets. I’m thinking this bubble will affect their business.
I think E-Bay could do pretty well in 2008. People might be auctioning a lot of Miami condos there. Not to mention those half priced white Lexuses and Jags.
you are forgetting the buyers. will there be enough of them?
I like the Daum crystal animals and have bought my entire collection of them (20 + pieces) on Ebay. These are expensive suckers in the stores ($200 - $4,000) and I have never paid more than 50% of retail for one on Ebay. I have six more on my watch list and figure they’ll be getting cheaper yet as FBs and “estate sales” (kids dumping mon and dad’s stuff to pay credit card bills) keep rolling in. I also got a Garmin heart rate monitor new for 50% of retail. Amazing.
txchick, you are so right. Ebay is a great place for bargains and for people who have spendable cash, it will probably be the place to shop as the housing crash progresses. There will be many more sellers chasing a smaller pool of buyers.
I buy and sell electric guitars on eBay (mostly to play and enjoy for awhile, since I’m not one of those snobby collector types who hangs ‘em on the wall to look at). Anyway, my favorites are Jackson/Charvel guitars from the 1980, and I’ve noticed an interesting trend: the expensive handmade Jacksons from the mid ’80s (the ones that are actually sorta collectible) have been really soft on eBay lately–I was able to pick up one for a decent (but not fire sale) price to be my main player. But the inexpensive Japanese-made Charvel versions of those guitars made at the same time have actually *increased* in price. They used to be the ‘hidden gems’ that I could get dirt cheap. What this tells me is that a perceptible shift has occurred where more people can’t/won’t go for the $1,000+ guitars and are going for the $500 range. This would impact eBay’s bottom line, since listing fees are partly based on the final sale price.
I hadn’t really thought of it in this way until I saw this thread. Before that I was just kinda depressed that my former ‘hidden gem’ Charvels could no longer be gotten for a song.
Your Charvels will be available for a song again, and probably very soon, as buyers shift from the expensive to the less expensive and then can’t even afford the less expensive. I am always amazed at how quickly trends for certain items go through the up and down cycles on ebay. First, there’s a mania where people bid things up, then ebay gets flooded with similar items and reproductions and it levels off and peters out. Kinda like the housing bubble, although the sales cycle on ebay is much, much faster, like a matter of months.
I always get a good laugh watching the Antiques Roadshow, when they tell some poor slob that his grandma’s “rare” pottery would go for $10,000.00 at auction. Not on ebay! Not even close. Maybe (big maybe) at some upper crusty auction house like Sotheby’s or Christie’s, if they’ll talk to you.
Anyone in the Bay area hearing any layoff rumblings from Ebay?
No surprise here. HP is still in restructuring. Older and costlier employees are leaving or asked to leave. Intel has 1000 mid managers on the block. Seagate has let go of Maxtor employees. As for Ebay which works you to death, so I was told from ex-employee it will be … no surprise for them to layoff expensive local employees and hire in another state.
Wow, that would really stink if Ebay hired in another state, but it would be a real sign of the times. Heck, it is named for the Bay area. What would they call it then? E-Tenn? E-Ken? Amazing the cascading effect this bubble is going to have on all sorts of businesses.
How about E-BomBay?
6 Indians cost less than 1 American, and they work hard!
Same here in AZ. I wandered into J C Penney in Ahwatukee last Saturday just after noon. This is in a more or less mid-upscale strip mall area, with restaurants, specialty shops, and big box all within a half mile radius. The parking lot was half full—I got a spot practically next to the door. The store was dead—nobody looking, nobody lined up at the checkout stands, nobody anywhere. And this was the weekend before many of the schools opened here.
This bubble is really clarifying the geographical patterns of my ebay side business. For a number of years, the majority of my business came from CA, WA and AZ. A little bit from the Northeast. Once in a while from the Midwest. Then I began to see business coming from Tennessee and North Carolina, even from my own state. Transplanted from the West Coast and New York. Interesting. I’m thinking Ebay might be a good short.
Two weekends ago we went into the Paradise Valley Mall (Scottsdale, AZ area) because JCPenney was having the obligatory back to school sale. There was hardly anyone in the mall. It was very apparent to my wife and I that the economy was changing. Even in this area, that wishes it was The ‘OC, lots of ex-CA residents, but most bought homes greater than their incomes I fear.
I calculated what the average home should sell for in Scottsdale and I came to $292,000 (which is based on $65,000 median household income at a fixed rate of 8% and a payment ratio of 35%). Meanwhile Dataquick reports that the median 1st QTR sales price was around $475,000. So we can see that the housing is very overpriced in relation to income levels (fundamentals rule out every time). Someone must have bought with teaser rate arms to qualify for all these homes…
We were surprised to have Time Warner doing door-to-door solicitations trying to sell their service bundles. Perhaps their telemarketers’ numbers are down?
There are two guys in my office and I noticed that they do not go out for lunch, they bring their lunch from home. Funny coincident that both of them bought new house on 05 and used suicid loans.
“There are two guys in my office and I noticed that they do not go out for lunch, they bring their lunch from home. Funny coincident that both of them bought new house on 05 and used suicid loans. ”
On the other hand, it’s decisions like that (bringing lunch from home), that will allow our 30 year to be paid off in 11.
the biggest factor causing there decline in economic actitivites can be summed up in one word: Gas. Amount spend on it *cannot* be cut. A few can reduce their usage of it, yet they are still spending more than before. Not going out tonight is so easy to do.
Imagine if you purchased a home in “beautiful” Murrietta (Inland Empire, CA) and has to commute to San Diego (OR) commute to The “OC. I personally know of someone spending just under $1000 per month to drive from Inland Empire to Irvine Spectrum, he only makes $75,000yr.
Hi. I live in Wash, DC suburb. A friend was getting new windows for his 35 year old house. Nice (architectual grade) wood interior window aluminium clad exterior. Typically the wait for the factory oder would be 4 - 6 weeks. There were made withing 1 week. There was an installer - a good craftsman friend had used for years - who had availability immediately.
Wow, that’s a huge indicator right there. DC-area contractors weren’t even touching renovation projects a couple of years ago, from what I remember.
“The typical monthly mortgage payment that Southland buyers committed themselves to paying was $2,437 last month, up from $2,052 a year ago. Adjusted for inflation, current payments are about 6.2 percent above typical payments in the spring of 1989, the peak of the prior real estate cycle.”
Talk about total bullshit. This comparison is rotten apples to oranges. Today’s mortgages are based on Option ARM interest only teaser rates. Absolute nonsense distortion.
Good catch. Many Option ARM teaser rate/payments are much lower than even interest-only payments. I saw someone recently with a $430,000 loan whose payments were $1516. Covering the interest on her loan, would have taken payments of $2777. She wanted to refi, but I could not help her because she could not afford “normal” payments (my bank does not do Option-ARMs.)
>”Adjusted for inflation, current payments are about 6.2 percent above typical payments in the spring of 1989, the peak of the prior real estate cycle.” (…) This comparison is rotten apples to oranges. Today’s mortgages are based on Option ARM interest only teaser rates.
At least, it gives a lower bar for a comparison: Even with all options available to have lower payment, the mortgage payments are higher than at the last peak.
And that’s fine, if it were presented in that way AND also had they re-priced those ARMS at terminal payment based on current rates remaining flat and used that as a second comparison. We have run out of greater fools. Now what?
Sorry this is OT, but I need some advice. I live in D.C. and I responded to an ad for a house for rent that’s managed by a realty company. After I told the realtor we were interested and agreed to a credit check, she called me and said that there is another party interested and that they’ve “escalated” the rent by $150 a month and wanted to know if we would match it. I told her we were no longer interested. Is what she did unethical?
I’d walk. There’s tons of rental property available, with tons more on the way. Out here in Loudoun County, the Centex townhome sales center has a bunch of bannersflags out front. One of these flags says: “Leasing”.
Yes. But illegal is another issue. Anyone know?
you should have said “No problem, I’ll match it!” Sound sincere. You didn’t sign anything. Hang up. Never speak to that person again. Hopefully they will blow it with the supposed “other family” and tell them to get lost. When they call you back, say “I changed my mind”.
Better yet, “tell them only if you lower the rent $50″.
I’ve been in similar situations, always walked away, always found better places for cheaper.
>> you should have said “No problem, I’ll match it!” Sound sincere. You didn’t sign anything. Hang up. Never speak to that person again. Hopefully they will blow it with the supposed “other family” and tell them to get lost. When they call you back, say “I changed my mind”. Better yet, “tell them only if you lower the rent $50″. I’ve been in similar situations, always walked away, always found better places for cheaper.
I used to do L/T law issues in DC, and I don’t recall anything about that being illegal, but please don’t take my word for it, since there are a LOT of laws around here and I don’t pretend to know ‘em all.
Even if it was legal, you did well to walk away. If this is how the company handles its listings, I can only guess what sort of crap they pull in their “management” of the property.
Of course, I have a bias against apt. management companies, ever since the management of my apt. in L.A. a zillion years ago managed to hired as resident managers a couple with ties to organized crime who burglarized many of the units (including mine) and then split. These criminals had done this before and been caught, and yet somehow the idjits who managed my place didn’t find out. Nice HR work, there. The scary thing is that I heard that this couple managed to pull off the same scam again later on. Sheesh!
as a daily reader of craig’s list, i’d say walk. eventhough the dc area (inside the beltway) has not exhibited the same kind of price softness and inventory as other parts of the country, it is slowly weakening. and if you want to live in loosely-defined columbia heights, you have lots of choices.
Slightly OT but relevant vis a vis Cochella Valley housing market
http://www.signonsandiego.com/news/state/20060815-0639-ca-prostitutionbust.html
“The suspects would dispatch the prostitutes, who charged between $200 to $2,000 for sexual services, Doyle said. They used the money to fraudulently secure loans for million-dollar homes around the Coachella Valley, authorities alleged.
“They were living large,” Doyle said. “
At least the girls worked for a small fixed fee, rather than a 6% cut of the property transactions.
LOL. A free market at work, for a change.
my poor sister-in-law just got her brokers license here in venice, ca. she now tells me “so what, there’s absolutely no work”.
i’m trying to steer her into a new line of work. she has a lot of bills and lives off savings.
What line of work are you steering her towards?
I know a number of people in the Bay Area who went from being marginally qualified programmers at internet start-ups to being realtors. They have been skating along on the internet and RE bubbles, and are going to have to figure out some other line of work to get into in the near future, imo.
True… some I have known as SW Sales are now Realtors.
Has your SIL looked into brokering commercial rentals? I’m no expert on commercial, but there seems to be a lot of activity in that space around here.
Just FYI- we posted a downwardly revised homebuilder sentiment chart a little while ago. It’s quite nasty. Check it out:
BubbleTrack.blogspot.com
Pasadena 91104: I have seen several properties being offered by banks at 2004/2003 prices. In one case the asking price was substantially below the price paid for the FB 2 or 3 years ago. In another case (just listed now), the bank is asking the amount of the mortgage (in April the FB was mentioning the possibility of a foreclosure, asked for 200 k more than the current bank price and he was talking about the bank needing to approve short sale).
The bank prices are roughly 200 k below current asking prices of comparable properties … These would have been 800/900 k houses in 2005.
There are also REPOs being offered in the 1 million and (much) higher market of La Canada (“Only a question of time” or mrincome, would you like to contradict this?)
Although there are some delusional flippers and owners in Pasadena-La Canada-Altadena, there are many flippers and FBs trying to bail out at zero gain or at a small loss.
Hopefully the crash will happen faster than some predictions posted here.
Pasadena Renter,
How can you tell if they’re bailing out at zero gain or a small loss? Zillow sales history? I rent a house in Atwater Village now, but lived in Altadena part of last year. Was really annoyed by asking prices — very ordinary houses on run down blocks for between $600-$700K.
The LA county assessor web page tells you for how much the house was bought, if it was bought within the last 2 years.
Some owners/flippers/FBs in Altadena seem to be smoking something. Not much is selling though. Many pending sales go back to the market. Multiple houses for sale are not listed by ziprealty. Many houses have been in the market for way more than 4 months. And many flippers are trying to (unsuccesfully) bail out.
I love it.
Can you give a link?
link for what? LA county assessor (http://assessormap.co.la.ca.us/mapping/viewer.asp)?
Pending sales going back to market is an observation from the signs in front of houses for sale.
Multiple houses for sale that are not listed is an observation of the houses for sales with signs in lawns, versus hits in ziprealty.
Bailing out is a comparisson between asking prices+history of reduces prices as given by ziprealty, vs information given by the LA county assessor.
For a case of a repo, see below.
Contact a title co and see if you can get an account with them so that you can research online. If not then call the customer service dept of a title company and see if they will research the home for you. You may need to find someone in the R.E. business to get you a contact.
‘The bank prices are roughly 200 k below current asking prices of comparable properties’
Pas Renter, Could you post an address or a link? I sold my Pas condo in 2003 and wonder when I should buy it back.
1714 ASBURY DR, Pasadena, CA 91104: the FB tried to sell it for 880 k in April, now listed by bank for 670. The FB bought it for 660, apparently more than 2 years ago.
This address gets a Zestimate of 920K and has this sales history, per zillow.com:
Sale History
07/25/2006: $773,100
07/08/2004: $650,000
03/04/2003: $448,000
There is something wacky about the zestimate. Are zillow’s numbers off?
how do you find out about bank owned properties for sale?
I’m going on my weekly San Diego downtown Condo Sales Center tour tomorrow during lunch. Anyone else work in downtown San Diego and want to see some cool things? I bet at least 2 attractive condo sales reps hit on us…
OC is absolutely experiencing price declines….there are reductions going on for virtually all properties….it’s just not reflected in NAR’s data yet (I wonder why?). My wife and I track housing very closely and we estimate there has been a 10-15% price decline already on mid-priced homes ($750-850 k) and more on many of the high end priced homes. I personally know of a number of homes originally priced in the high $900 k’s that are now low $800 or high $750k.
Yes, there is still considerable denial in the OC and many sellers who don’t have a clue of whats going on BUT this will rapidly change once Labor Day comes.
I think you are just referring to asking price. Reductions in asking price are not very meaningful. If you want to research reductions a little better, use zillow, look at what similar house sold for a year ago and then look at the asking price. Just about everytime, you will see that they are still asking more then last years prices.
I think sale prices have declined too and not just asking prices. Median sales prices can climb when there are only 12 buyers left and 9 of them are folks who just don’t care about money or market declines (i.e., it doesn’t represent a big investment to them). Nobody who has a clue or a concern about money is buying in this market. Thus the few remaining buyers represent more of a high end market than before and the median price might climb even though actual sales price per sq foot for the same kind of inventory is falling.
I spoke to a client yesterday selling the front house of a 2 on a lot in Redondo Beach about 3/4 mile from the ocean. She listed it 999k two months ago with zero visitors. Just reduced 100k to 899 and is still out of her mind.
Good to hear. What areas are you watching. I’m interested in Costa Mesa, Huntington Beach, Fountain Valley and, maybe, Tustin.
Some $30 to $50k reductions in my zip in North Orange County, CA.
Me and the wife visited an open house in San Clemente this past weekend. The listing price was 950k. The realtor had a presentation posted in the house that showed how homes were still appreciating, yet it was a great buying opportunity with the increased inventory. Me and the wife just nodded. Then he continued to show us the house.
At the end of the tour, he tells us “you know what, a year ago this house would have gone for 1.2 million within a week, this is a great deal”.
So then my lovely brilliant wife asked him: “Didnt you just tell us a few minutes ago that homes are still appreciating?”
He looked at like he didn’t know what we were talking about, so we just thanked him for his time, took his card and went about our way.
Smart wife I like that.
“Last month’s sales total marked the lowest for a July since 1997. Southland sales have declined for eight consecutive months on a year-over-year basis.”
Just wait until the (real) prices are at 1997 levels! Nominal will probably never get there, as a big inflation adjustment would be necessary…
I have been tracking the 91914, 91915 area (Eastlake and Rolling Hills). I sold my condo (February 2006) that I had purchased back in 1998 for 90K. Never refinanced. Sold it for 385K. Have the money in CD’s. I am renting back ($1,500.00 a month). I had been looking to buy a home. I looked at probably more than 80 homes, but at the same time have been reading this blog and decided to wait. My realtor was not very happy, but oh well!. I am only 35 years old. I have a good job (90K a year). Some people argue with me that I am throwing away money by renting, and do not understand why I am doing it. I am tired of trying to explain to people what is going on withthe housing market. I guess I will just do what I think is best for me. I am not in a rush. What motivates me is that I know that I will soon be able to buy the house that I really want without having to pay a ridiculous price. I want a 30 year fixed rate. I have paid off all my credit cards and am dept free. Thanks Ben for this blog, you have helped many people. This is the first place I go when I first start my day. It motivates me. Thanks!
I’m sort of in the same place. A bit older, make a little bit more money, living debt free, saving $$$, etc.
Have many of the same feelings, blah, blah, blah..so,
What single major factor will determine your entry point?
What? It sound like you are kind of miserable. Bad day at work?
Actually a good day at work. Got a lot done.
Sorry if the post seemed negative..it wasn’t meant that way.
Price down 40%.
I want my NASDAQ-75%-off discount!
Nobody believes 75%-off-discounts are possible in RE, which is why they are…
Veronica,
Be sure to max out your retirement contributions, in whatever vehicles you have available, before calculating how much you afford to spend on purchasing anything.
As for the “throwing away money” argument, just keep in mind that personal housing is a consumption expense, just like buying food or cars.
If you want to invest in Real Estate, by all means do so. But look for smart ways to do it. Example: If you had purchased the American Century Real Estate Fund on January 1st of this year, you would be up 16.44% YTD as of July 31st. Try doing that with an SFH in the same period, or just about any six-month period.
REACX is doing well because they mostly invest in commercial RE, which is in good shape so far. If and when commercial RE gets in trouble, you can sell the fund the same day with no commission due.
Just my $0.02
I would be very careful and go slowly if making any investment in any sort of REIT, RE Fund, RE ETF, etc. as I fear this make just be chasing returns and buying at the top.
Just my $00.01, (the other $00.01 is tied up in escrow)
Yup, I should have said: This is an historical example only, YMMV, this not investment advice, historical returns do not predict future returns, disclaimers ad infinitum.
I was not smart enough to to put more money than I did into this particular mutual fund two years ago when I bought it, and I probably won’t be smart enough to sell out before I lose some of my paper gains. And I am not an agent or representative of Vanguard Mutual Funds, Inc. nor any affiliate thereof.
I am not good at investments. Just have my money in CD’s 4.24% interest rate. I put it in CD’s. Better than have it in my checkings account. My plan was to sell and buy!! I work as a parlalegal, and know about the law but not about investing! Would like some input as to maximizing my money without risk. I hate loosing!!!!!!!!!!!! Thanks!
If you are not comfortable with risk, keep your money in CDs for now. This is a risky time.
i have done the same thing. sold my ca. home last year and am renting in nw az. my money is in money market account at state farm bank. 4.60%. i can axcess by checks or atm card.
My EmigrantDirect savings account is currently paying 5.15% interest, and I can take the money out whenever I wish.
“….purchased back in 1998 for 90K. Never refinanced. Sold it for 385K. Have the money in CD’s. I am renting back ($1,500.00 a month).”
So your equity must have been over 300k. With CDs at 5% or more it sounds like the interest is just about covering your rent. You’re on cruise control.
Yes it is. So why worry! Right! But, I want to own a house. We all do, in this blog! That is why we are always on this blog. We want homes to be more affortable. Be able to live the way we do and have a nice home. I have 2 kids (16 and 13 - Boy and Girl). I get anxious because I think that I am waiting to long for them to have a good and fun place to live. (I do now, but I want better). I thing about it, and it is all because I am want to save money, and not buy a home that is overprices. I am very conservative. I can go out and buy a BMW’r or whatever, but, do I need it? No!!. My kids will be in college (I hope), and I will have the house of my dreams without them, but I guess the next generation will come. I am Mexican, and I know we are different then most Americans. Our kids are everything to us, and we want everything for them. I love American people, but god some make dumb decisions. PEACE!!!!!!!!!!!!!!!!!!
VIVA AMERICA!!!
Veronica,
You are very cool. Keep it up.
Veronica,
I did the same thing as you (Eastlake, zip 91915), except sold my house a little earlier in mid 2004. I also rented in the same neighborhood for a year until I decided to take an out of state job transfer. In May 04 there were 11 listings in 91915. In June 04 when I sold there were 41. Right now, as I’m sure you know, the inventory has been hoovering right around 265! I look almost every day and I definately see a trend of prices coming down in the area. If you can hang on as a renter for at least another year I think you will definately see at LEAST a 10-15% price drop, though in some price ranges I think it will be even more. Have patience.
I’m an honorary Mexican then. I live for my kids, work for my kids, try to make the best decisions for my kids. For me, saving for their college education and my own retirement (so they don’t have to pay for it later) is the same as withholding for taxes and medical insurance. I realized that buying a house in this market would mean I couldn’t save for the future, so I sold my old house, banked the cash, and rent a nice place in our same neighborhood, less than 4 blocks from our old house.
I truly cannot understand people who don’t save for the future. I think it’s some sort of mass delusion …
So this is my 1st posting - thanks Veronica for your great message - I sold in 12-05 and have all proceeds in money markets at various banks. I’m not much of a risk taker either and its kind of scary having to even trust FDIC insurance if the housing market sours too much. Anyway thanks to this blog and its participants for some moral support for those of use trying to wait out this crazy situation. This is my longest time renting in 22 years of home ownership - and appreciate hearing thoughts from others in the same boat.
Congratulations, Veronica! You’ve beat the machine and are on your way to a stable future. I sold my CA properties and am renting as well. It is hard when people in my income bracket tell me I’m crazy to live this way, but I just smile and move on. The culture of debt seems to have taken over everyone in our generation (I’m 42) and I can’t believe people who hold CA real estate without a huge equity cushion can sleep at night.
Isn’t it great to be free of departments! -
For the life of me I don’t get throwing away money on rent concept. You pay to get use of the the house / apartment. Why don’t they say you’re throwning away money on food, clothing, ect…
Yep. Ask the people claiming you’re “throwing your money away” if they have a car payment. They likely do. Then ask them why they’re “throwing money away” on a car payment when they could have bought a cheaper car with cash or had a lower payment. They will give you blank stares.
I haven’t had a car payment since 2004 and I’m hoping to not have another one for quite some time. And yes, I rent.
Adjusted for inflation, current payments are about 6.2 percent above typical payments in the spring of 1989, the peak of the prior real estate cycle.”
OK, so are today’s current payments equivalent to 1989? I doubt it. That $2,437 payment buyers “committed to” was likely I/O, at best, and more likely some type of negam teaser rate. Yikes.
Yep, total BS. The comparison is irrelevant and a misrepresntation of facts. DataQuick are RE complex shills.
Don’t forget that Dataquick started out selling sales comps to appraisers. This is still probably the bulk of their revenue. So if the market slows then they quit making money because all the appraiser wont be paying them monthly for the sales info. So I think they have a “vested interest” in making sure that there are still some FB’s out there…:)
The John and Ken radio show in LA is currently talking about the housing bubble. You can listen in at http://www.kfi640.com
It’s actually John Zigler. They didn’t really get into the real issues at hand although I’m surprised to hear the subject on KFI since they really hawk a lot the IO lender products on that station.
“… oh and we are nice people..”
My fav is the Crestline Funding ad. When the announcer gives the phone number, he says 1-800-555-F-U-N-D. But he really emphasizes the “F-U” part.
All the SCal AM talk shows air time are largely paid for by the RE Mortgage Lending industry. I enjoy listening to AM talk radio but I realy get sick of listening to the constant hawking of RE loans every commercial break.
I have not heard till the J Zigler show Mentioned above of any AM Talk show host(Rush,Jon &Ken,LElder,O’Reilly,Hannity,Medved,ect), ever discussing the RE bubble at all. There is a lot of shilling of RE Products by the AM Radio Talk show Hosts,the RE complex being in fact their paymasters.
Mr. KABC has been talking about a housing bubble for at least 3 years. Three years ago he would have these realtors call in and say “prices will only go down if 30 year rates hit 13% like in 1980.”
Used to listen to Mr KABC evenings(7-10 pm) on AM 790 but He is not at that time slot anymore. Where is he at? One thing about his show was that he did not accept much Paid Commercial ads and was thus a lot more honest and forthwright in his opinions.
I would not be surprized if he did get into the housing bubble debate and discussed it without trucking to the RE Complex: MR KABC will take on controversal subjects: A few years back he was blasting former GOvernor Gray Davis and his administration over the Enron/Cal energy Crisis for almost a year.
I just listened to the show on the way home! John Zigler was the guest host today. He had a couple sellers on from all over So Cal who were in FULL denial, saying that even though their house had been on the market for nine months, they were bound and determined to get their asking price. He kept pushing them, saying “Well, if it’s not selling, don’t you think you should drop the price??”
Not a chance.
I am going to throttle the next person who says it is currently a buyer’s market. It will be a buyer’s market when a cruddy stucco box in Mar Vista built during the Korean War is being offered at $350K instead of $850K (the wife and I want to buy but no way are we going to become 30-year slaves to this insane market).
One argument I make that simplifies things a bit for people when they say I am throwing my money away on rent. I tell them that I work for one of the most profitable companies in the OC and guess what? They rent their buildings.
I wonder how many realtors rent their offices.
You’re kidding? right?
Most of them rent their desks/phones:)
One thing is clear; they can’t even buy a clue.
sure they can.
the finance it with an I/O or neg. amort arm.
Touché. Of course with the buyers market in clues these days they’d be better off renting. Hey! I got it! Professional “nagging little doubt in the back of your head” services. I’ll set up a little booth outside of Riverpark Development offices with a sign reading: “I Am Those Two Neurons You are Supposed to Rub Together. (Advice, The Smaller of $5000 or Half Your mistake.)”
Maybe they should rent a clue - and take possession faster that way.
I haven’t a “clue” what you are all talking about.
Perhaps the word you’re talking about is “Clew”.
Clew=A ball of yarn
So that’s what it is…….”BINGO”
So Learah is the clew?……….
He’s full of yarns……damn I’m slow
Exactly! So they should understand, shouldn’t they?
Just ask them to look at their mortgage breakdowns and see how much they pay in interest on each month’s payment. Ask them if they know this is the same concept as paying rent except they take on the risk of holding a depreciating asset (appreciates at rate of inflation minus the cost of upkeep which comes out negative in real terms).
Like you said, there’s a good reason companies tend to lease property instead of own. Companies like to be as liquid as possible in order to adjust to changing environments. This should hold for individual people as well that view themselves as a business.
Owning only really makes sense when you know for sure you will be staying somewhere for a long time (>15 years), have excellent job security, and have a good sense of predicting where you will be in the near to long term future. Also, prices must be low enough where there is a significant monthly financial advantage to renting…a lot of the time there is, but definitely not now with a $600,000 condo renting for $1800.
I checked Zillow and Townhomes are still selling in 93021 for high prices. So the fall in prices has not happened yet. However inventory is up same zip code checking Realtor.com Maybe next year prices will fall?
Many Realtors still use the phony multiple biddors line.
therefore we get price pops. Take away the phony bidders
you get real declines.
Maybe the buyers are demanding cash back from these high selling prices? So they are really paying less for the house? Or they are not paying attention to what’s going on.
“But investors from Los Angeles and the Bay Area say they’re pressing ahead in Sacramento County, even though buyers already can pick from an abundant supply of new condos and sales incentives.”
YOU GO GIRL
PUT SOME MORE CONDOS UP … THE MORE THE BETTER…. SO WHAT IF A GLUT BRINGS PRICES DOWN…
GO GO GO GO
Rent. And don’t just rent, rent a shithole for cheap. Really, is it that bad to live ghetto for a couple of years? I certainly don’t want to fork over $2500 in interest payments to the bank each month, but I certainly don’t want to fork over $2000 to the guy making the $2500 interest payments so that he can easily cover the last $500.
In my opinion, the best thing to do, at least in the Bay Area, is to find some place for $1600 or less and stay there for a while. And stick the cash wad in a >5% CD or something.
I have totally given up on the main stream media to give us the facts. I will from this point on only trust my fellows and the blogosphere!!! Death to the MSM!!
Agree! The MSM is 6-12 months behind the quailty blogs like this one!!!
The MSM are behind with their news, but we need them to get a bubble consensus in the whole population. In January, I read on patrick.net something like “the boom is over, the bubble pops, we all agree on that”. The MSM is only on the way there now.
“A fool and his money are soon parted”. Just another quote from someone, somewhere. The fact of the matter is that people are in debt in their eyeballs to own a piece of the American Dream, “Debt”. Yes, “Debt” is the American Dream. Any takers?